Educational Finance

Abstract

The American system of government-financed education is decentralized among 50 states and more than 15,000 local school districts. Local funds are derived from local property taxes, and this system tends to make local spending unequal. State- government efforts to equalize education spending involve manipulating the local ‘tax price’ with matching grants. School districts with low tax prices are not, however, necessarily populated by rich people, so the distribution of state funds may penalize many low-income districts with large amounts of non-residential property.

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